CDNS
Cadence Design Systems, Inc.
$316.49
Platform & Compounding FCF
80%
Two-stage FCF DCF
Strong
·
Conviction
Overvalued
Trading 93.0% above fair value
You pay
$316.49
Bear
$102.49
Fair
$163.95
Bull
$233.93
Bear
$102.49
-67.6%
10% stage 1 growth, 11% discount
Fair
$163.95
-48.2%
16% stage 1 growth, 11% discount
Bull
$233.93
-26.1%
21% stage 1 growth, 11% discount
Adjust Assumptions
15.9%
11.0%
3.0%
Key Value Driver
FCF growth rate (16% base case)
Terminal Value % of EV
43%
Implied Market Multiple
65.1x
Market is pricing in (growth)
24.7%
vs 15.9% base
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (31 analysts)
$403.27
Divergence from AlphaVal
59%
Summary
Using a two-stage FCF DCF with 16% growth decelerating over 15 years, discounted at 11%, the base-case intrinsic value is $163.95 per share.
Warnings
Stock-based employee pay equals 41% of profits. This dilutes existing shareholders, so cash flow alone overstates what owners really earn.
Wall Street's average price target is $403.27 (from 31 analysts). Our estimate is 59% below the consensus -- consider that gap carefully.
Key Risks
- P/E alone misleads — earnings depressed by growth investment
- Cyclical or commodity businesses may be misclassified as platforms
- Terminal value dominance suggests sensitivity to long-run assumptions